Chinese Stock Market Finishes Volatile Year

Chinese Stock Market Wraps Up Stunning, Volatile Year but Uncertainties Abound.

This year, the world discovered the Chinese stock market. Investors in China poured their money into shares like never before, sending the market on a turbulent, stunning, record-breaking ride.

And around the world, people took notice: In February, for the first time ever, a plunge in Chinese stocks triggered a global market sell-off, suggesting the potential sway this heretofore ignored market will have in years to come.

China's market quickly recovered and the Shanghai Composite index went on to soar 97 percent this year, making it the world's best-performing major benchmark index. But the year ahead isn't going to be as rewarding, analysts say, and the volatility will likely continue. "It was a nice rally," UBS economist Jonathan Anderson wrote in a recent report. The market in 2008 "may not be nearly as exciting."

While many Chinese believe the government will to try to keep the markets on an even keel ahead of the Beijing Olympics in August, other risks loom. Beijing is struggling to keep inflation in check and could continue to raise interest rates. Also, the mortgage crisis in the U.S. has raised the risk of a recession that might sap demand for Chinese exports.

Jason Zhou is among the legions of Chinese stock investors who were chastened by the market's roller-coaster performance this year. Zhou, who works for a foreign trade company in Shanghai, bought shares in oil and gas giant PetroChina just after it listed shares on the Shanghai Stock Exchange in November, paying $5.90 a share.

Normally, such elite state-controlled companies have seen huge, sustained gains after IPOs on domestic bourses. But PetroChina, whose market value according to some methods of calculation briefly surpassed $1 trillion after its local market debut, has fallen back to just above $4.10 per share, still nearly twice its IPO price but down enough to have cost many investors plenty of money.

Zhou cut his losses and sold when the shares fell to about $5.20. "The loss is not huge, but it's impressive enough," Zhou says. "This was not a pleasant experience." Neither was the 8.8 percent plunge in the Shanghai index on Feb. 27, which spooked investors around the world and was one of several gut-wrenching drops this year.

In another sign of China's growing market muscle, Shanghai became the second most popular place for initial public offerings behind New York as companies raised $48.62 billion through November, according to the World Federation of Exchanges. That surpassed the $31.81 billion raised in IPOs in Hong Kong and the $43.47 billion chalked up in London during the 11-month period, the federation's numbers show. Only the New York Stock Exchange, with $52.06 billion, had more.

However, despite the rising prominence of China's two main stock markets in Shanghai and Shenzhen, they still severely restrict foreign participation and are largely walled-off from the rest of the world. Overseas companies are barred from listing on them and foreign individual investors can only buy limited quantities of what are known as "A shares" through designated "qualified foreign institutional investors." Those so-called QFII purchases are capped at $10 billion, though that ceiling is due to triple soon.

China's markets still exist mostly to raise money for state companies -- the reason they were set up in the early 1990s. In 2007, PetroChina, coal miner China Shenhua Energy Co. and China Construction Bank Corp. heeded the government's call to return to local capital markets to raise funds and improve the quality of listed companies. Among the IPOs up next: China Mobile, the country's largest mobile service provider, which plans to raise $10 billion or more in a listing in coming months.

The success of China's markets hasn't been entirely due to a booming economy -- the country has had to build investor confidence after years of devastating scandals that kept investors away and share prices low. Reforms have been implemented, aimed at combating rampant price manipulation and other abuses, improving shareholding arrangements and strengthening corporate disclosure requirements.

But as far as Zhou is concerned, they haven't gone far enough. "Listed companies in China seem to have more freedom than elsewhere to choose what they want or don't want to disclose," he says. "That's so unfair to investors, especially our individual investors."

Still, many analysts and investors remain bullish about China. The economy is forecast to grow close to 11 percent next year once again, despite efforts to curb investment and cool inflation. "Don't be too panicked about the experience with PetroChina," says Chen Huiqin, an analyst at Nanjing-based Huatai Securities. "The IPOs of big state-owned companies are still full of potential."

The market has retrenched since mid-October after regulators, fearing that prices were rising too quickly, suspended sales of mutual funds to new subscribers. That ban ended in late December, spurring a modest rally, but prices -- so far -- show no signs of shooting skyward. Since hitting a record of 6,124.04 on Oct. 16, the Shanghai index has fallen 14 percent. On Friday, the last day of trading for the year, it closed at 5,261.56.

Wang Mingxuan said she's pleased so far with how her investments have fared, but she's realistic about the market and its dynamics. "The risk is always very high, and the government can't protect you," Wang said. "You come here for a fight, not for fun. You should learn things about the market or else nobody can help you."

Weekend's History Special: Genghis Khan of the Mongol Empire

Genghis Khan conquered more land than anyone in human history, but could never shake the bad reputation that usually accompanies the words "Mongol horde".

Khan's actual name was Temujin, since it would have been presumptuous to name him "Supreme Ruler" (which is what "Genghis Khan" means) at birth. Temujin was born in the '60s... the 1160s, specifically, when free love and rock-n-roll were sweeping Mongol culture.

The Mongols were a nomadic tribe with a Shamanic religious tradition, which in the minds of Europeans of the day equated to barbarism. Temujin certainly had a fairly barbaric upbringing. His father was killed by a rival tribe when he was barely a teenager. The young Mongol and his family spent his Wonder Years first in exile, where they starved and froze concurrently, then as a prisoner of a rival tribe.

When he reached a not-so-tender age, Temujin killed his way to freedom for himself and his family. Killing would prove a very effective way for young Temujin to get what he wanted. Due to his prowess as a warrior, he eventually gained control of his late father's tribe, then set about building alliances. A rival tribe kidnapped his wife, prompting Temujin to mount a daring rescue attempt. His victory was so decisive that it inspired other tribes to pledge him their loyalty.

After forging a loose federation through a mixture of conquest, intimidation and diplomacy, Temujin held an increasingly strong position as the 12th century came to a close. He invested the spoils of his wars into superior weaponry, including innovative siege machinery and armor for his cavalry, which gave him a decided advantage over his less-organized, more-impoverished rivals. His forces were extremely mobile; the cavalry carried spare horses so that riders forced to dismount could quickly regain their advantage.

In 1206, Temujin formally united the factions under his umbrella and declared himself Genghis Khan, "supreme ruler" of Mongolia. His power consolidated, Khan looked outward toward his neighbors.

His neighbors had reason to worry. Khan was a brilliant military strategist, and he pioneered several strategies which are now entirely entrenched in military warfare, including military intelligence and psyops. The Mongol horde was ruthless and efficient, and news of its approach inspired genuine "shock and awe" among those in its path.

Khan swept over most of Central Asia. He captured Beijing and conquered China, the Korean peninsula and a big chunk of Russia.

Khan's forces were highly trained, but they preferred not to fight. Khan employed overwhelming force and siege tactics to get what he wanted. When forced to fight, Khan's forces methodically slaughtered everyone in their path, a more effective terror tactic than some of the overly elaborate tortures employed by his rivals.

Fairly or unfairly, the Mongol horde quickly gained a reputation for massacre, which had a tendency to shorten the sieges. Until very recently, most accounts of Mongol devastation included the wanton slaughter of civilians and prisoners.

It's difficult to know exactly how well-deserved that bad reputation was, but the Mongol Wars of the 13th century depopulated Asia by somewhere between 30 million and 60 million people. Hundreds of thousands of Chinese were said to have committed suicide in the face of approaching Mongol hordes.

We live in an age of revisionist histories, however, and the history of Genghis Khan is particularly susceptible. During the heyday of the Soviet Union, Mongolia lived under a despotic Communist regime that suppressed and tinkered heavily with the region's history. The topic of Genghis Khan, an icon of nationalistic pride, was verboten.

What few tales survived were cast in a decidedly barbaric light. Khan's reputation was further sullied by association with the atrocities committed by his successors (like the grandson who built a pyramid out of the skulls of thousands of Baghdad's greatest scholars).

In recent years, however, it has become fashionable to depict G.K. as a wise leader and philosopher, and not without reason. Although the process of being overcome by a Mongol horde was not especially pleasant, the actual Mongol regime wasn't bad once it was in place.

Khan consolidated his rule by employing cooperative local officials from the previous regime and maintaining the local infrastructure largely intact. Khan also enforced a legal code that was surprisingly liberal for its day.

In many respects, the Great Yasa closely mirrored the 10 Commandments and the Golden Rule, with an abiding precept being simply "Love one another". Khan also offered a "New Deal" that took care of the poor and infirm.

Khan outlawed taxes on clerics of any religion. More controversial and progressive, for the day, Khan decreed that all children were legitimate, and thus entitled to inherit, even the children of prostitutes and concubines.

Although Khan himself was not religious, his laws forbade overt religious or racial persecution, an extremely smart move for someone whose dynasty covered a vast melting pot of beliefs. The key word, however, was "overt." Despite his reputation for religious tolerance, many of Khan's supposedly non-denominational laws nevertheless amounted to persecution for different religions, particularly Islam.

The legal code -- known as the "Great Yasa" -- forbade the ritual slaughter of animals, which meant that Muslims couldn't prepare halal meals in accordance with religious law.

The Yasa also banned the designation of anything as taboo or unclean, which presented further problems. Khan also allowed women to be educated, banned efforts to make women cover their heads and encouraged freedom of expression and worship.

As a result, numerous fatwas were issued against the hated Mongols, and the destruction of the Muslim caliphate by the Mongols (after the death of Khan) continues to shape the world's political landscape.

All this alleged enlightenment aside, Genghis Khan had subjugated most of China and a fair amount of adjacent territory by the time he died at age 60 -- one year for every million people killed, give or take.

The circumstances of the Great Khan's death are unknown. Most versions of the story hold that Khan fell from his horse and was killed. According to some legends, the fall took place during a hunt; others say it happened in the heat of battle.

The burial of Genghis Khan was nearly as much of a production as his life. The exact site of his grave is one of history's most closely guarded secrets. Although a site in China is purported to be Khan's mausoleum, its authenticity is highly suspect. A more recently uncovered site on the steppes of Mongolia is still being investigated.

According to legend, an armed escort accompanied Khan's body to its final resting place, slaying any living thing that witnessed their passage. One story says that Khan was buried alongside 40 baby camels. Other legends say the mystery has a more mundane cause -- the funeral procession got mired on a muddy road and simply buried their illustrious leader on the spot.

Khan's empire lived on after his death, initially parceled into four khanates divided among four sons of Temujin. Khan's successors continued his campaign of conquest for several generations. At its peak, the Mongolian Empire Temujin had founded was mind-blowing in scope, stretching from Poland to China along its northern border, and from Baghdad to Hanoi along its southern rim.

Genghis Khan may be gone, but not forgotten. With literally hundreds of wives and concubines, not to mention who knows how many pieces on the side, Khan did his part to help repopulate Asia after depopulating it so memorably.

Weekend's Special: Yoga, Nourishment for the Soul

Yoga is not a religion. It has no creed or fixed set of beliefs - perhaps that is why its benefits have appealed to people from all over the world and it has become an international movement in the last decade.

An Ancient Art

It is interesting to learn about the origins of Yoga. Ancient seals unearthed in the Indus Valley provide clear evidence of widespread Yoga practice earlier than 3,000 B.C. However, it was C.E. Patanjali, considered the father of modern Yoga, who formalized Yoga and compiled 195 aphorisms which are called the Yoga Sutra. In the Yoga Sutra, he described the eight aspects of a Yogic Lifestyle and called it the Eight Limbs of Yoga.

The limbs are practical guides to a person's personal development to achieve the harmony of the mind, the body and the spirit which leads to Samadhi or enlightenment. The word Yoga means "to join or yoke together." It aims at bringing the mind anybody together to create a harmony in our ever busy lives.

Breathing techniques are based on the concept that breath is the source of life in the body. The yoga student gently increases breath control to improve the health and function of both body and mind. These two systems of exercise and breathing then prepare the body and mind for meditation, and the student finds an easy approach to a quiet mind that allows silence and healing from everyday stress.

There are many styles of Yoga. Perhaps one that stands out because of its sheer individuality of technique is the Bikram studio. Bikram Yoga is the brain child of Bikram Chaudhury in the US and is taught at 42 degrees and incorporates about 26 postures when exercised in the correct manner, promote sweating and detoxification. He is yogi to stars such as Madonna, Serena Williams, Robert Downey Jr., etc.

Bikram Yoga uses the principal of the tourniquet effect: stretching, balancing and using pressure all at the same time in a very warm room. The blood supply to arteries and veins is cut off, creating pressure. When released, a lock gate effect is created causing blood to rush through veins and arteries, flushing them out.

Sakura Moretto, a follower of Bikram Yoga, explains why it suits her better than normal Yoga: "Bikram Yoga has also increased my endurance to other discomforts, such as heat and the traffic jams. Where earlier I would have regularly lost my cool, I can now stay calm, control my frustration and preserve my energy."

As the world spins faster and people rush along coping with dangerous stress levels, the struggle to survive is perhaps forcing resourceful humans to go back to the tools our ancestors used to maintain themselves.

The only difference is that one had to scale mountain peaks and search deep forests for yogis in earlier times, today he might just sign off for a break from his space station or his computer desk and go to practice his yoga in a small room somewhere.

The Five Basic Practices of Yoga

- Asanas or Physical Poses
The Asanas are designed to free our mind and body from tension and stress. It relaxes, rejuvenates, and energized the body and aims to bring the body and the mind into a harmonious union. Asanas should be done with comfort, ease, alertness and steadiness, achieving a balance between ease and effort.

- Pranayama or Breathing Exercises
Pranayama is the control of breath. The breath is regulated and controlled through the practice of breathing exercises. The duration of inhalation, retention, and exhalation of breath is regulated with the aim of strengthening and cleansing the nervous system and increasing a person's source of life energy. Pranayama practice also makes the mind calmer and more focused.

- Prathayara or Withdrawal of the Senses
This occurs during meditation, pranayama or asana wherein you are so focused and immersed on your yoga, meditation or breathing pose that you become unaware of outside situations. Dharana or concentration is training the mind to focus without any distraction. To achieve this, you can focus your mind on an object at a time. This can also serve as a preparation for meditation.

- Dhyana or Meditation
Meditation is the practice by which there is constant, concentrated observation of the mind. It means focusing the mind on one point, stilling the mind in order to perceive the self.

- Samadhi or Enlightenment
This is the ultimate goal of the Eight Limbs of Yoga. It is characterized by the state of ecstasy and the feeling that you and the universe are one. It is a state of peace and completion, awareness and compassion with detachment.

Where Financial Liberalisation Caught People

These are the glory days of the financial markets. They are bigger, richer and more powerful than they have ever been.

Yet it is that very position at the heart of global economic life that makes this year's credit squeeze a threat. Already, fairly or unfairly, a pantomime cast of predatory lenders, bankrupt bankers and teenage money managers has been lined up to take the blame. There are calls - some justified - for stricter regulation of financial markets. But before writing new rules, we should remember the financial world of 40 years ago, and where liberalisation has got us.

In the US 40 years ago, commercial banking and securities trading were strictly separated by the Glass-Steagall Act, and banks were unable to expand across state boundaries. On Wall Street and in the City of London, there were fixed commissions for share trades, and a closed circle of underwriting banks. Home mortgages came from building societies or a savings and loan and there was little competition on interest rates. Banks held a lot of reserves, but before the first Basel agreement on capital adequacy, reserves often bore little relation to a bank's risk. Exchange rates were fixed under the Bretton Woods regime and the international mobility of capital was restricted.

The liberalisation of these restrictions, mainly in the 1970s and 1980s, brought great benefits. The deregulation of financial markets led to a surge of competition and innovation. The cost of trading securities has collapsed. Banks have become bigger - and so in one sense more secure - and brought the techniques of the securities business to bear on banking. As a result of liberalisation, financial intermediation is cheaper, and we have a more complete and efficient set of markets.

Whereas 40 years ago many millions of young people may have wanted to borrow against their future income, in order to go to university or to buy a home, they struggled to do so. The liberalisation of consumer finance has eased credit constraints on many.

With the free international movement of capital has come a surge in direct and portfolio investment across borders. Not only has capital been allocated more efficiently as a result, but foreign investment has been a channel for the transfer of technology and management skills, and so increased growth. The wave of globalisation in recent decades would have travelled more slowly without financial liberalisation.

But for all this gain, there is a cost. Any relaxation in controls on banks' capital and activities makes it easier for them to take risks - and so increase profit - in the knowledge that the state cannot afford to let them fail. There is no simple answer, but a system of bank rescues in which shareholders lose all of their money creates the right incentives. Shareholders walked away from this year's bailouts of Northern Rock and Germany's IKB.

Consumer credit liberalisation also leads to a trade-off. Subprime mortgages made home ownership possible for hundreds of thousands of people who would otherwise have been tenants. Yet incompetent and fraudulent misuse of subprime mortgages has caused tens of thousands of those people to lose their homes as well as a shock to the financial markets. Regulation should be directed at the misuse and mis-selling of these products and not at the products themselves.

The greatest effect of financial liberalisation, however, has been to bind markets more closely together. A shock in the US mortgage market really can affect the availability of credit for a European consumer. To those consumers this is hard to explain, and feels like a threat, yet while the scope for financial shocks is now greater, there is little evidence that they have increased in frequency or in magnitude. Financial regulation, especially on bank liquidity and consumer lending, should be tweaked in response to the credit squeeze. But its liberal direction, which has brought great benefits, must remain.

US Home Sales Dive, Feed Recession Fears

New-Home Sales Plunge to Lowest Level in More Than 12 Years, Heighten Recession Fears.

The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years. The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession.

New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the worst sales pace since April 1995.

"It was ugly," declared Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.

The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000. By region, sales fell in all parts of the country, except for the West. In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and fell 6.4 percent in the South. In the West, however, sales rose 4 percent.

Over the last 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.

"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying." The median sales price of a new home dipped to $239,100 in November. That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.

On Wall Street, the Dow Jones industrials, after an erratic session, managed to squeeze out a small gain even as the grim home sales report added to some investors' angst. The Dow closed up 6.26 points at 13,365.87.

Would-be home buyers have found it more difficult to secure financing, especially for "jumbo" mortgages -- those exceeding $417,000. The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.

"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.

The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.

Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.

Problems in housing are expected to persist well into 2008 -- a major election year. The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. And, the situation has given Democrat and Republican politicians-- including those who want to be the next president -- plenty of opportunities to spread blame around.

The economy's growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year. Former Federal Reserve Chairman Alan Greenspan recently warned that the economy is "getting close to stall speed." The big worry is that the housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.

To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year. Its latest rate cut, on Dec. 11, dropped the Fed's key rate to 4.25 percent, a two-year low. Many economists are predicting the Fed will lower rates again when they meet in late January.

"The risks are as high as they've ever been during this expansion that started in late 2001 that the economy will fall into a recession," said Bethune. "The odds are now nudging up close to the 50 percent mark."

European Banks Will Herald EU Crisis

The announcement before Christmas by the world's central banks of further measures to help restore liquidity to money markets was at first greeted with euphoria.

But, as with the US Federal Reserve's August 17 discount rate cut, it was not long before the measures were viewed as likely to be inadequate to deal with the size of the problem. The shift by the Fed to providing term liquidity via auctions has taken a leaf out of the European Central Bank's liquidity management manual. It may help. But with euro-area money markets having remained stressed - even after the extraordinarily big liquidity injections over the year end - it seems that money market liquidity provision alone is unlikely to solve the problem.

Should the financial crisis persist in spite of central banks' best efforts, the general perception is that the European economy would be less vulnerable than the US economy to its effects. That Europe has not generated on a large scale its own subprime asset class, the proximate cause of the recent difficulties, underpins this analysis. While some European banks might have been contaminated with subprime assets, it is argued, the waste is unlikely to be toxic enough to trigger a full-scale credit crunch. At the ECB's December press conference Jean-Claude Trichet, its president, suggested that still-strong bank lending might be an indication that "the supply of credit has not been impaired". The reality is more complicated.

At this stage, the challenge is to gauge the magnitude of the strains in the banking system and the extent to which future lending will be curtailed. The recent strength of bank lending in the euro-area reflects both re-intermediation and the difficulty of raising new finance in capital markets. It is therefore a sign of weakness, not strength, as it places even greater stress on bank balance sheets. A better measure of the credit squeeze is one that combines all capital-raising activities. The rate of increase in capital raised by companies in the previous 12 months in the form of bank loans, net debt and net equity issuance, for example, posted a drop of EU57bn ($83bn) between July and September, the biggest two-month decline since mid-2001, and was followed by only a modest recovery in October.

There are numerous other signs of an emerging credit squeeze. The rates that banks charge on loans have been creeping up despite the ECB having kept its policy rate on hold. Since July, the interest rate charged on loans to companies has increased by 25 basis points. The rate charged on mortgages has gone up by 17bp. Combining these metrics into an overall index, we find that bank credit conditions have tightened sharply and now stand at levels last seen in mid-2004. One hopes the new balance sheet and liquidity constraints facing European banks will not be too great to bear. In making our euro-area forecasts, we have calibrated the short-term effect to be equivalent to about a 75bp rise in interest rates that will be gradually eliminated by the end of 2009. That is more than most central banks and international institutions are assuming, and consistent with much slower bank lending next year. But in assessing the vulnerability of an economy to tighter credit it is necessary to gauge not only the extent to which banks will restrict their lending but also the importance of bank lending for financing economic growth.

According to the International Monetary Fund, about 60 per cent of private-sector liabilities in the euro-area and the UK consists of bank loans, while only 40 per cent is debt and equity. The 60 per cent figure for bank loans is higher than that of Japan's economy, where a broken banking system has contributed to more than a decade of poor economic performance. By contrast, bank loans account for only 20 per cent of private-sector liabilities in the US, with the rest accounted for by debt and equity.

This matters a lot. It means that, were banking systems to retrench significantly, the consequences for the economy are likely to be far greater in Europe than in the US. By symmetrical reasoning, however, the European economy is less vulnerable to a capital markets freeze than is the US. The lesson: in the US, watch the markets; in Europe, watch the banks.

Asian Markets Drop on Benazir Bhutto Death

Most Asian Markets Drop on Bhutto Assassination, Worries About US Economic Outlook.

Most Asian markets fell Friday amid anxiety over the assassination of Pakistani opposition leader Benazir Bhutto and lingering worries about the outlook for the U.S. economy.

Bhutto's death on Thursday, just ahead of Jan. 8 elections, sent shock waves through international markets on worries that global instability may follow, although some analysts said the impact is likely to be limited.

"The sudden event has caught worldwide attention because Pakistan is not any other developing country. It is a nuclear-power country. However, we view the current response to the event to be short-term," Westcomb Securities said in a note.

While Pakistan's stock market was closed, the market reaction in neighboring India was muted. Mumbai's Sensex index dipped 9.77 points, or 0.05 percent, to close at 20,206.95. In Tokyo, Japan's stock market wrapped up the year with a sharp drop. The Nikkei 225 index fell 256.91 points, or 1.7 percent, to 15,307.78 points. For the year, the Nikkei lost 11.1 percent, its first annual decline in five years.

Japanese investors remain worried about the American economy -- a vital export market -- amid the subprime mortgage crisis. A report from Goldman Sachs that said write-downs at U.S. banks, including Citigroup Inc., Merrill Lynch & Co. and JPMorgan Chase & Co., may deepen, helped to squelch sentiment.

Also, a less-than-expected rise in U.S. durable goods orders exacerbated concerns about the U.S. economy. In New York Thursday, the Dow Jones industrial average dropped 1.4 percent to 13,359.6.

The Nikkei is likely to stagnate during the first half of 2008 but has a chance of recovering once the U.S. credit crunch settles down later in the year, said Kenichiro Yoshida, senior economist at Mizuho Research Institute in Tokyo. "A pessimistic view is prevalent about the Nikkei," said Yoshida. "Looking ahead to next year, we must keep our eyes on Wall Street." Trading in Tokyo is scheduled to reopen on Jan. 4 after the New Year's holidays.

Mainland Chinese markets ended a stellar -- if turbulent -- year Friday on a down note. The Shanghai Composite index fell 0.9 percent to 5,261.56 points on worries that authorities will raise interest rates or take other steps to cool the country's blazing growth. But for the year, the benchmark index surged nearly 97 percent, making it the world's best-performing major stock index in 2007.

Looking ahead, concerns about tightening measures will likely restrain the market's gains next year, analysts said. "We expect the stock market will go up in 2008, but the magnitude of the growth will be less than that of 2006 and 2007," said Gui Haoming, chief strategist of Shenyin & Wanguo Securities. "The economy will keep growing but there is uncertainty" about the "government's macro-economic control."

In Hong Kong, jitters over Bhutto's assassination and continued concerns about the U.S. economy dragged down the benchmark Hang Seng Index by 472.33 points, or 1.7 percent, to 27,370.6 points. "I would suggest investors to avoid buying any stocks now amid the uncertain market outlook," said Castor Pang, a strategist at Sun Hung Kai Financial.

In Hong Kong, heavyweight China Mobile dropped 2.6 percent on concerns it may soon face a more competitive environment following a potential restructuring of China's telecom sector. China Netcom fell 4 percent. Hong Kong winds up the year's trading on Monday and will be closed Tuesday for New Year's Day, as will all other Asian markets.

Indonesian shares end year's final trading session 0.2 percent lower at 2,745.826 in moderate volume. The benchmark index gained 52 percent for 2007.

Buffett Buys $4.5B Stake in Marmon, His 'Bet on America'

Warren Buffett's Company to Pay $4.5 Billion for 60 Percent Stake in Marmon Holdings Inc.

Warren Buffett's investment company announced Tuesday it will pay $4.5 billion for 60 percent of Marmon Holdings Inc., a private company of more than 125 manufacturing and service businesses.

Berkshire Hathaway Inc., based in Omaha, Neb., said it plans to acquire the remaining 40 percent of Marmon over the next five to six years depending on future earnings of Marmon, according to a statement released Tuesday by both companies. Marmon is owned by trusts for the benefits of the Pritzker family of Chicago, the family that developed the Hyatt Hotel chain.

The deal is expected to close in the first quarter of 2008. Before the closing, Marmon said it will make a "substantial distribution of cash and certain assets to the selling shareholders," according to the statement.

Brothers Jay and Robert Pritzker acquired Marmon in 1953 when it was a small manufacturing operation in Ohio, according to the release. In 2002, Jay's son Tom Pritzker took over as chairman.

"Our transaction was done just the way Jay would have liked it to be done -- no consultants or studies," Buffett said in the statement. "I am pleased that over the next five to six years, we will be partnering and working ... in continuing to build Marmon."

Buffett, Analysts Say Berkshire Hathaway's $4.5B Marmon Buy Is Vote of Confidence for US

When tycoon Warren Buffett's investment company said on Christmas Day it would pay $4.5 billion for a 60 percent stake in industrial conglomerate Marmon Holdings Inc., he gave the U.S. industrial segment a much-needed vote of confidence.

Marmon has more than 125 manufacturing and service businesses and is owned by trusts of the Pritzker family of Chicago, which developed the Hyatt Hotel chain. The company has its collective hands in businesses across the transportation, energy and construction markets, with products ranging from railroad tank cars to metal fasteners.

"(The deal) is most certainly a vote of confidence for 'nuts and bolts' businesses," said Steven Kaplan, a professor of finance at the University of Chicago Graduate School of Business. Marmon was brought into the Pritzker family by brothers Jay and Robert in 1953, who saw opportunity in the small manufacturing operation in Ohio. Since that time it has grown into a conglomerate that boasted 2006 revenue of about $7 billion.

Thomas Russo, a partner and portfolio manager at Lancaster, Pa.-based hedge fund Gardner Russo & Gardner, said that an investment in an American industrial company will benefit Berkshire, as more companies flock oversees to do business more cheaply. "Through more industrial development going overseas, America has left itself rather vulnerable," Russo said. "And when you get the chance to grab onto a company that offers indispensable technology and can serve a customer's needs quickly, you may actually have quite a competitive advantage."

Berkshire's more than 60 subsidiaries range from insurance to clothing, furniture, restaurants, natural gas, candy companies and corporate jet firms. Berkshire also has major investments in such companies as Coca-Cola Co. and Anheuser-Busch Cos.

Many of Marmon's businesses overlap those of Berkshire, Russo said, allowing it to strengthen its roots and focus on more acquisitions within its respective sectors. The Marmon deal marks Berkshire's largest ever outside of the insurance industry. Marmon did not immediately return a call seeking comment Wednesday.

The deal will follow Buffett's traditional hands-off approach to acquired companies. Marmon's management team will remain in place and the remaining 40 percent stake in the company will be taken by Berkshire over five to six years, with the price based on Marmon's future earnings.

"It is very typical of his investment strategy," the University of Chicago's Kaplan said. "He buys businesses that he can understand, that are profitable and generating cash, and that is true of Marmon. He also looks for good management teams that he doesn't have to tinker with. He buys businesses that have staying power, puts in good management and lets them do their jobs."

The acquisition, pending regulatory and other approvals, is expected to close in the first quarter of next year. At that time, Berkshire said Marmom "will make a substantial distribution of cash and certain assets to the selling shareholders."

Russo said a company's culture is key to Berkshire, and that Buffett may allow the Pritzker family to retain a stake in the company to provide a further incentive for future performance. Russo noted Berkshire followed this model is its acquisition of Shaw Carpet and Nebraska Furniture Mart. "The culture gives (Marmon) an advantage over all other sellers," Russo said. "Because if you buy a company with a bad culture, or bad management, it's not going to work."

Sovereign Funds Pose Challenge

Sovereign Funds Take Center Stage in 2007, Pose Huge Regulatory Challenge.

Two of the biggest global business stories of 2007 are merging as the year ends: the subprime-spawned crisis in debt markets and financial services, and the rise of sovereign wealth funds. Large investment funds putting money to work at the discretion of national governments are taking advantage of the blows suffered by some of the globe's leading financial institutions to make minority investments on advantageous terms.

The investment in Merrill Lynch & Co. by Temasek Holdings PTE Ltd., owned by the government of Singapore, is just the latest in a string of sovereign wealth fund investments in such international stalwarts as Citigroup Inc., Morgan Stanley and UBS AG.

By their monetary votes of confidence in the world's financial services structure at this critical time, the sovereign wealth funds are doing more than making what likely will prove to be timely investments: They are allaying fears, at least for now, about the power of government-run entities.

Investments motivated by anything other than financial returns, for example national strategic advantage, would be greeted with concern. The minority stakes being taken in the world's financial services giants look like bargain hunting, so they aren't raising many rumblings. That said, they don't eliminate the larger issues posed by the growth of sovereign wealth funds.

Corporate governance and the related area of securities rule enforcement are among the important areas likely to be challenged as sovereign wealth funds grow and take larger stakes in companies open to investors.

The phenomenon is emerging just as the U.S. Securities and Exchange Commission and other key national regulators are trying to coordinate rules in an acknowledgment of the increasingly interconnected world of investments and publicly traded companies.

These are early days, but sovereign wealth funds won't make that task any easier. The questions are whether these investors can be considered just another group of mutual funds, or will there be more at stake than just maximizing returns on capital. Also, will governments' pursuit of national financial interests work against the swift and effective enforcement of securities laws?

SEC Chairman Christopher Cox, in a speech earlier in December, took on the sovereign wealth issue with a series of questions and observations that at least frame the issues faced by securities regulators. Here are a few excerpts from that speech, which is worth quoting at some length:

"Today, when a foreign private issuer is suspected of violating U.S. securities laws, our experience working with our overseas regulatory counterparts indicates that we could almost always expect the full support of the foreign government in investigating the matter," Cox said in the Dec. 5 address. "But if the same government from whom we sought assistance were also the controlling person behind the entity under investigation, a considerable conflict of interest would arise.

"Another issue is the conflicts of interest that arise when government is both the regulator and the regulated. When the government becomes both referee and player, the game changes rather dramatically for every other participant. Rules that might be rigorously applied to private sector competitors will not necessarily be applied in the same way to the sovereign who makes the rules."

Later in the talk, Cox addressed the issue of transparency. "In many industrial countries today, the ability of journalists and citizens to inquire into government affairs, or to criticize the conduct of government, is severely limited. In some countries, criticism of government policies lands you in jail, or worse. Is it reasonable to expect that these same governments will be magically forthcoming with investors? This raises significant questions for regulators such as the SEC, whose mission includes investor protection. Indeed, when it comes to transparency, the track record to date of most sovereign wealth funds does not inspire confidence."

Cox also raised the issue of what he politely termed the "significant disparities in the information that is available to government as compared with private marketplace actors." In other words, governments could use information gathered by their national intelligence services, among other sources, to help guide their investment decisions. Or they could conceivably put those intelligence services and other resources explicitly to work for their commercial advantage.

Cox wisely says trying to form a protectionist shell against these new investors is the wrong path: "Far better would be to address the underlying issues of transparency, independent regulation, de-politicizing of investment decisions, and conflicts of interest." Yes, that is far better. But, as the saying goes, good luck with that.

China Promises to Promote Clean Energy

China Promises More Clean Energy Spending but Warns Coal Use Will Climb.

China promised Wednesday to develop renewable energy for its fast-growing economy but warned that coal consumption will grow dramatically and avoided embracing binding limits on its greenhouse gas emissions.

In a report on its energy plans, the government announced no new initiatives but said it wants to curb reliance on oil and gas to drive an economy that is the world's second-biggest energy consumer after the United States.

"China gives top priority to developing renewable energy," said the 44-page report released by the Cabinet's press office. The report said Beijing will promote hydroelectric, nuclear, solar and wind energy, as well natural gas extracted from garbage dumps and coal mines.

China's economic boom has sharply increased its need for imported oil and gas. That has prompted complaints that Chinese demand is driving record-high world crude prices and led to diplomatic strains as Beijing builds closer ties with oil-rich pariah states such as Sudan and Iran.

Communist leaders worry about the mounting damage to China's battered environment from fossil fuel use and see mounting reliance on imported energy as a strategic weakness.

The share of renewable sources and nuclear power in China's energy consumption rose from 4 percent in 1980 to 7.2 percent last year, the report said. "China will pay more attention to the clean utilization of energy resources, especially coal, and make it a focus of environmental protection," the report said.

It said China takes greenhouse gases seriously and some of its measures would reduce its emissions. But there was no mention of whether Beijing might agree to demands by Washington to sign up to binding limits.

Beijing has rejected such limits, arguing that developing countries such as China are not to blame for current pollution levels and need to increase energy production to fight poverty. The report said China will expand measures to exploit its abundant coal reserves -- a step that will help to reduce reliance on imported fuel but could sharply raise greenhouse gas outputs.

"China will step up its efforts in prospecting coal resources," the report said. It said Beijing would reorganize its coal industry by closing smaller, less efficient mines while creating conglomerates with bigger production capacity.

Christmas Special: Christmas and Its History

In ancient pagan times, the last day of winter in the Northern Hemisphere was celebrated as the night that the Great Mother Goddess gives birth to the baby Sun God. It is also called Yule, the day a huge log is added to a bonfire, around which everyone would dance and sing to awaken the sun from its long winter sleep.

In Roman times, it became the celebrations honouring Saturnus (the harvest god) and Mithras (the ancient god of light), a form of sun worship that had come to Rome from Syria a century before with the cult of Sol Invictus. It announced that winter is not forever, that life continues, and an invitation to stay in good spirit.

The last day of winter in the Northern Hemisphere occurs between the 20th and 22 December. The Roman celebrated Saturnalia between 17 and 24 December.

The Early Christians

To avoid persecution during the Roman pagan festival, early Christians decked their homes with Saturnalia holly. As Christian numbers increased and their customs prevailed, the celebrations took on a Christian observance. But the early church actually did not celebrate the birth of Christ in December until Telesphorus, who was the second Bishop of Rome from 125 to 136AD, declared that Church services should be held during this time to celebrate "The Nativity of our Lord and Saviour." However, since no-one was quite sure in which month Christ was born, Nativity was often held in September, which was during the Jewish Feast of Trumpets (modern-day Rosh Hashanah). In fact, for more than 300 years, people observed the birth of Jesus on various dates.

In the year 274AD, solstice fell on 25th December. Roman Emperor Aurelian proclaimed the date as "Natalis Solis Invicti," the festival of the birth of the invincible sun. In 320 AD, Pope Julius I specified the 25th of December as the official date of the birth of Jesus Christ.

Why December 25?

For the church's first three centuries, Christmas wasn't in December—or on the calendar at all.

It's very tough for us North Americans to imagine Mary and Joseph trudging to Bethlehem in anything but, as Christina Rosetti memorably described it, "the bleak mid-winter," surrounded by "snow on snow on snow." To us, Christmas and December are inseparable. But for the first three centuries of Christianity, Christmas wasn't in December—or on the calendar anywhere.

If observed at all, the celebration of Christ's birth was usually lumped in with Epiphany (January 6), one of the church's earliest established feasts. Some church leaders even opposed the idea of a birth celebration. Origen (c.185-c.254) preached that it would be wrong to honor Christ in the same way Pharaoh and Herod were honored. Birthdays were for pagan gods.

Not all of Origen's contemporaries agreed that Christ's birthday shouldn't be celebrated, and some began to speculate on the date (actual records were apparently long lost). Clement of Alexandria (c.150-c.215) favored May 20 but noted that others had argued for April 18, April 19, and May 28. Hippolytus (c.170-c.236) championed January 2. November 17, November 20, and March 25 all had backers as well. A Latin treatise written around 243 pegged March 21, because that was believed to be the date on which God created the sun. Polycarp (c.69-c.155) had followed the same line of reasoning to conclude that Christ's birth and baptism most likely occurred on Wednesday, because the sun was created on the fourth day.

The eventual choice of December 25, made perhaps as early as 273, reflects a convergence of Origen's concern about pagan gods and the church's identification of God's son with the celestial sun. December 25 already hosted two other related festivals: natalis solis invicti (the Roman "birth of the unconquered sun"), and the birthday of Mithras, the Iranian "Sun of Righteousness" whose worship was popular with Roman soldiers. The winter solstice, another celebration of the sun, fell just a few days earlier. Seeing that pagans were already exalting deities with some parallels to the true deity, church leaders decided to commandeer the date and introduce a new festival.

Western Christians first celebrated Christmas on December 25 in 336, after Emperor Constantine had declared Christianity the empire's favored religion. Eastern churches, however, held on to January 6 as the date for Christ's birth and his baptism. Most easterners eventually adopted December 25, celebrating Christ's birth on the earlier date and his baptism on the latter, but the Armenian church celebrates his birth on January 6. Incidentally, the Western church does celebrate Epiphany on January 6, but as the arrival date of the Magi rather than as the date of Christ's baptism.

Another wrinkle was added in the sixteenth century when Pope Gregory devised a new calendar, which was unevenly adopted. The Eastern Orthodox and some Protestants retained the Julian calendar, which meant they celebrated Christmas 13 days later than their Gregorian counterparts. Most—but not all—of the Christian world now agrees on the Gregorian calendar and the December 25 date.

The pagan origins of the Christmas date, as well as pagan origins for many Christmas customs (gift-giving and merrymaking from Roman Saturnalia; greenery, lights, and charity from the Roman New Year; Yule logs and various foods from Teutonic feasts), have always fueled arguments against the holiday. "It's just paganism wrapped with a Christian bow," naysayers argue. But while kowtowing to worldliness must always be a concern for Christians, the church has generally viewed efforts to reshape culture—including holidays—positively. As a theologian asserted in 320, "We hold this day holy, not like the pagans because of the birth of the sun, but because of him who made it."

Christmas Official, But Not Generally Observed

In 325AD, Constantine the Great, the first Christian Roman emperor, introduced Christmas as an immovable feast on 25 December. He also introduced Sunday as a holy day in a new 7-day week, and introduced movable feasts (Easter). In 354AD, Bishop Liberius of Rome officially ordered his members to celebrate the birth of Jesus on 25 December.

However, even though Constantine officiated 25 December as the birthday of Christ, Christians, recognising the date as a pagan festival, did not share in the emperor's good meaning. Christmas failed to gain universal recognition among Christians until quite recently. In England, Oliver Cromwell banned Christmas festivities between 1649 and 1660 through the so-called Blue Laws, believing that Christmas should be a solemn day.

When many Protestants escaped persecution by fleeing to the colonies all over the world, interest in joyous Christmas celebrations was rekindled there. Still, Christmas was not even a legal holiday until the 1800s. And, keep in mind, there was no Father Christmas (Santa Claus) figure at that time.

Christmas Becomes Popular

The popularity of Christmas was spurred on in 1820 by Washington Irving's book The Keeping of Christmas at Bracebridge Hall. In 1834, Britain's Queen Victoria brought her German husband, Prince Albert, into Windsor Castle, introducing the tradition of the Christmas tree and carols that were held in Europe to the British Empire. A week before Christmas in 1834, Charles Dickens published A Christmas Carol (in which he wrote that Scrooge required Cratchit to work, and that the US Congress met on Christmas Day). It was so popular that neither the churches nor the governments could not ignore the importance of Christmas celebrations. In 1836, Alabama became the first state in the US to declare Christmas a legal holiday. In 1837, T.H. Hervey's The Book of Christmas also became a best seller. In 1860, American illustrator Thomas Nast borrowed from the European stories about Saint Nicholas, the patron saint of children, to create Father Christmas (Santa Claus). In 1907, Oklahoma became the last US state to declare Christmas a legal holiday. Year by year, countries all over the world started to recognise Christmas as the day for celebrating the birth of Jesus.

Origins of Santa Claus

Most religious historians and experts in folklore believe that there is no valid evidence to indicate that St. Nicholas ever existed as a human. In fact, there are quite a few indicators that his life story was simply recycled from those of Pagan gods. Many other ancient Pagan gods and goddesses were similarly Christianized in the early centuries of the Church. His legends seems to have been mainly created out of myths attributed to the Greek God Poseidon, the Roman God Neptune, and the Teutonic God Hold Nickar. The Christian church created a fictional life history for St. Nicholas. He was given the name Hagios Nikolaos (a.k.a. St. Nicholas of Myra).

Many legends and miracles are attributed to Saint Nicholas.When he was an infant, his mother only nursed him on Wednesdays and Fridays; he fasted the remaining days. During his lifetime, he adored children and often threw gifts anonymously into the windows of their homes. A sailor who fell overboard was reputedly saved by Nicholas when the saint walked on water, retrieved the sailor and carried him back to the ship. After an innkeeper had robbed & dismembered some students, Nicholas reputedly re-assembled them and restored them to life. Nicholas took pity on a poverty-stricken family with 3 daughters who faced the threat of being forced into prostitution because they had no wedding dowries. For two daughters he crept-up to their house at night and threw bags of gold through a bedroom window. For the last daughter, he threw a bag of gold down the chimney -- which landed in a stocking she had set by the fireplace for drying. The traditional association of chimneys & stockings with Santa Claus comes from this story. Nicholas was also noted for his generosity with children -- he would reward them with treats if they had studied their catechism & behaved well. Nicholas was therefore patron saint of schoolchildren & sailors.

The transformation of Saint Nicholas to Santa Claus happened largely in America -- with inspiration from the Dutch. In the early days of Dutch New York, "Sinterklass" became known among the English-speaking as "Santa Claus" (or "Saint Nick"). In 1809 Washington Irving, a member of the New York Historical Society (which promoted a Dutch Saint Nicholas as its patron saint), created a tale of a chubby, pipe-smoking little Saint Nicholas who rode a magic horse through the air visiting all houses in New York. The elfish figure was small enough to slide down chimneys with gifts for the good children and switches for the bad ones.

Santa Claus is the sum total of several trends, customs and beliefs that only got unified about a century and a half ago. His story is told through an ex-animation of the 3 names given to him in America: St. Nicholas, Kriss Kringle and Santa Clause.

Much of the present form of the Santa story is undoubtedly due to the works of Clement Clark Moore and the cartoons of Thomas Nast. In 1822, Dr. Moore from New York wrote a Christmas poem, "A visit from St. Nicholas" to read out to his children on X'mas Eve. The following year one Ms Harriet Butler read the poem and requested a copy from him. Later she sent it without Dr. Moore's consent for publishing to Troy, New York Sentinel. Consequently it was published and became popular. In 1938 Dr. Moore revealed that St. Nicholas was his creation. And since then it has appeared countless times.

The 19th century American cartoonist Nast who had lived on the same West 23rd Street as Dr. Moore, did a series of Christmas drawings for Harper's Weekly. It was where the today's much familiar fat and rosy cheeked Santa with large beard and ringing bell made his debut after being modified from fat, little elf-like creature depicted in Dr. Moore's poem.

And perhaps what made Santa more realistic is the classic reply of the editor of New York Sun in response to the 8-year old Virginia O' Hanlon's query whether there really was a Santa Claus. The ed replied "Yes, Virginia, there is a Santa Claus', and made Santa living for ever to the kids.

Have a Merry Christmas

Today, many of the pagan uses are reflected in Christmas. Jesus was born in March, yet his birth is celebrated on 25 December, the time of solstice. The Christmas celebrations end the 12th day of Christmas (6 January), the same amount of days that the return of the sun was celebrated by ancient and Roman pagans. It thus is no surprise that Christian puritans - or even conservative Christians - often are upset that Christmas "is not as religious as it was meant to be," forgetting that Christmas was not celebrated at all until fairly recently.

The 25th of December is celebrated as the birth date of Jesus Christ. The Bible does not mention Christmas, and early Christians did not observe the birthday of Christ. Christmas as we know it became widely popular only in the 19th Century.

Christmas starts on 25 December and ends 12 days later on 6 January with the Feast of Epiphany also called "The Adoration of the Magi" or "The Manifestation of God."

The concept of "Peace and Joy" over the Christmas season originates from the pagan believe in the magical powers of mistletoe. Enemies meeting under a mistletoe had to call truce until the following day.

In Finland and Sweden an old tradition prevails, where the twelve days of Christmas are declared to be time of civil peace by law. It used to be that a person committing crimes during this time would be liable to more stiff sentence than normal.

During the Middle Ages, many churches were built in honour of Saint Nicholas, the patron saint of children. Wearing his red and white bishop's robes, he would ride on a donkey to deliver gifts to children. In 1860, illustrator Thomas Nast introduced Santa Claus in the fashion we now know him.

Christmas Special: Bethlehem, the Christmas Town

Bethlehem was first settled by the Canaanite tribes, naming the city Beit Lahama. They built a temple to the God Lahama on the present mount of the Nativity. Around 1200 BCE, the Philistines had a garrison stationed in Bethlehem because of its strategic location.

The city also is significant to Jews because it is the burial place of the matriarch Rachel and the birthplace of King David. Samuel anointed David king in Bethlehem (I Sam. 16:1-13) and David was a descendant of Ruth and Boaz, who were married in Bethlehem. Bethlehem is the birthplace of Jesus and therefore a holy site to Christians around the world. Following the Israelites rule, the Greeks occupied the region unitl the arrival of the Romans in 160 BCE.

The city, just 5 miles south of Jerusalem, was turned over to the Palestinian Authority as a result of the 1995 Israeli-Palestinian Interim Agreement. It is standing at an elevation of about 765 m (2 510 ft) above the sea, thus 30 m (100 ft) higher than Jerusalem. Bethlehem has a population of approximately 50,000 people, with the Muslims holding a slight majority. In Hebrew, the town is Bet Lehem ("House of Bread" ) and, in Arabic, it is Bet Lahm ("House of Meat").

The Bethlehem agglomeration also covers the small towns of Beit Jala and Beit Sahour, the latter also having biblical significance. For centuries, Christian pilgrims have made the roughly 2½ hour walk from Jerusalem to Manger Square. Today, the trip typically begins at the train station in Abu Tor and proceeds along the Hebron Road.

Bethlehem plays a significant part in the Old Testament, in the history of the Israelites, both before they entered Egypt and slavery, and after the Exodus. It appears in the Old Testament as Ephrat, where Rachel the beloved matriarch of the Jewish People, the favorite wife of Jacob, died during childbirth.

The Tomb of Rachel, is a pilgrimage place for Jews and Muslims alike. Among other Biblical mentions and Holy Sites in Bethlehem: Rachel's tomb, Naomi and Ruth, Samuel anoints King David and the well from which David's warriors brought him waters. The Church of the Nativity in Bethlehem is one of the oldest continuously operating churches in the world.

The Manger Square

The Manger is situated on the north side of the Grotto, and opposite the Manger, an Alter is dedicated to the Wise Men who came to Bethlehem from the East under the guidance of a star bearing gifts to Baby Jesus.

The original structure was built by Bishop Makarios of Jerusalem at the direction of Constantine I of the Roman Empire following the First Council of Nicaea in 325. That structure was burned down in the Samaritan revolt of 529. It is administered by a coalition of Roman Catholic and Greek Orthodox clerics. Tradition has it that the church was built over Jesus' birthplace, and it is held as sacred by followers of Christianity and Islam.

It is actually a combination of two churches, with a crypt, the Grotto of the Nativity, where Jesus is said to have been born:
- The main section (the basilica) now being controlled by the Greek Orthodox. It is designed like a generic Roman basilica, with three aisles and an apse. It featured golden mosaics covering the side walls, now largely decayed, and a Roman style floor (since covered over). It also features a large iconstasis, and a complex array of lamps throughout the entire church.
- The adjoining Roman Catholic church, which is done in a more modern Gothic revival style, and has since been further modernized according to the liturgical trends after Vatican II.
- The underground cave, which features the altar over the place Jesus is said to have been born. The exact spot is marked by a hole in the middle of a silver star, surrounded by silver lamps. This altar is neutral although it features primarily Armenian Orthodox design.

Manger Square is the focus of activity of Christmas celebrations not once, but three times a year. In addition to the traditional Western celebration which begins on December 24, the Greek Orthodox mark their Christmas on January 6 and the Armenian observance is on January 19.

Nearby Sights

Just south of Bethlehem is another of Herod's palaces. This one, known as Herodian, was built on the flat top of a cone-shaped hill, nearly 2,500 feet (758 meters) above sea level. Herod's architects actually shaped the mountain to make it symmetrical. The fortress was built in the first century, and like Masada, became a stronghold of the Zealots in the Great Revolt against the Romans. It was also used by the Jews during the Bar Kokhba revolt.

The palace has 70 foot high walls and towers that rise 100 feet above the floor of the fortress. A synagogue, mikve and storerooms have been excavated on the site. The path to the fortress was originally marked by 200 marble steps. From atop the hill, the palace has a commanding view of the Judean Desert, Dead Sea, Bethlehem and the Jerusalem suburbs. According to the historian Josephus Flavius, Herod was buried here, but his final resting place has not been found.

The Mar Saba Monastery was founded by St. Saba of Capadocia in the 5th century. This is a stereotypical monastery where reclusive monks spent years in caves without communicating with anyone. Over the centuries, invaders razed the monastery, but it was rebuilt by the Russian government in 1840. The bones of St. Saba, which had been taken to Venice by the Crusaders, were returned after Pope Paul VI's visit to Israel in 1964 as a goodwill gesture toward the Greek Orthodox Church. The skulls of monks killed through the years are kept in a chapel in the monastery. Even today, women are not allowed inside the monastery.

Two other monasteries are in the Bethlehem area. One is Mar Elias, which was built in the 6th century. According to legend, this is where Elias rested on his flight from the vengeance of Jezebel. The St. Theodosius Monastery was built in 500 C.E. Christians believe the wise men rested here after God warned them in a dream they should not return to Herod.

Also south of Bethlehem, on the way to Hebron, are three giant cisterns known as Solomon's Pools. In truth, they are part of a water system built 2,000 years ago during Roman times and used to supply water to Herodian and Jerusalem.

Investors Eye Shoppers This Week

Wall Street Eyes Shopping Trends This Week, As Well As Data on Home Sales, Durable Goods.

With Wall Street itching for an end-of-the-year surge but still somewhat nervous about consumer spending, Americans' shopping patterns in the last hours before Christmas could make or break a "Santa Claus rally."

It's possible last week's stock gains marked the start of the big advance typically seen in the last week of one year and the first week of the next. But with home prices still falling, and oil and food prices elevated, it's certainly not a given. Even less of a guarantee is whether the market can hold onto any gains made in the upcoming weeks if consumers' spending power weakens.

Usually the fourth quarter is a strong one for the market, partly because it's when people do the most shopping. But the Dow Jones industrial average -- unless it rises at least 445 points over the next five trading days -- will post its first fourth-quarter drop since 1997. Ending the year at Friday's level of 13,450.65 would bring the blue-chip index its widest fourth-quarter loss since 1987. Last week, the Dow ended 0.83 percent higher, the Standard & Poor's 500 index finished up 1.12 percent, and the Nasdaq composite index rose 2.13 percent.

A Commerce Department report on Friday showing that November sales outpaced expectations helped lift stocks, along with a hefty profit gain at Research in Motion Ltd., the maker of the BlackBerry, and word that Merrill Lynch would get a $5 billion cash infusion from overseas.

However, last Friday's huge number of contract expirations may have distorted the market's performance. Moreover, the Commerce Department report indicated that inflation, even after stripping out food and energy costs, is accelerating and that Americans are saving less.

On Monday afternoon, ShopperTrak RCT Corp. releases sales data from the last Saturday before Christmas, or "Super Saturday." The stock market will close early Monday at 1 p.m. EST for Christmas Eve and will remain closed Christmas Day.

On Wednesday, the International Council of Shopping Centers releases its weekly chain store sales index, and Thursday, the Conference Board releases its measure of December consumer confidence. Economists surveyed by Thomson Financial predict confidence dipped this month compared to November.

Industry data so far has shown weak spending patterns for December. ComScore Inc. said last week that online sales from Nov. 1 through Dec. 14 rose less than projected and by a smaller amount than last year, and brick-and-mortar stores have also reported sluggish sales. Either consumers are truly cutting back their spending this season, or they are waiting until the very last minute to get the best prices on their holiday gifts.

Wall Street, clearly, is hoping for the latter scenario. "It looks like people are waiting for sales, and the retailers know that," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. "Shopping more than ever is a national pastime in this country. My guess is it's not going to be great, but it's not going to be terrible either."

As 2008 approaches, Wall Street is keeping a close eye on other parts of the economy, too, such as business spending, manufacturing and, of course, the housing market. The Commerce Department is expected to report a gain Thursday in November durable goods orders. On Friday, the Commerce Department reports on new home sales in November and the National Association of Realtors reports on last month's sales of existing homes. Both indicators are expected to be as weak, as they were in October.

"With the job market softening, real income growth collapsing, household savings diminishing, consumer confidence on the decline, and inflation accelerating, it would defy the laws of physics if consumer spending were to remain robust in the months ahead," wrote Bernard Baumohl, managing director of the Economic Outlook Group LLC, in a research note.

Weekend's Special: Angel Falls in Canaima National Park, Venezuela

The Angel Falls Adventure

You gaze in awe at the powerful force of nature known as Angel Falls, whose waters plunge 979 meters deep. Angel Falls-the world's tallest waterfall-is one of the eight natural wonders of the world. You are there, after a long, hot hike, swimming in one of the refreshing natural pools beneath the towering falls.

You look up and see a rainbow created from the dance of the mist and the tropical sun. As you swim in the clear waters with your traveling companions, you sense a spiritual force, a mysterious energy that soothes you. You lean back and float in the natural pool and realize that you are far way from everything, but there is no other place that you would rather be.

Make This Angel Falls Hiking Dream A Reality

You will travel through jungles, grasslands and hidden canyons in Canaima National Park. You will also meet members of the native Pemón tribe and experience their culture and lifestyle.

Pemón Girl The sites and sounds of Angels Falls and the Canaima National Park are unforgettable. Canaima National Park is one of the world's great natural wonders and a hiker's paradise. You will trek across grassy plains that never seem to end and rainforests that reach to the heavens.

You will also hike on and around vertical rock formations called tepuis that are hundreds of millions of years old. Tepuis have flat, slopping tops that are the sites of unique plant life. Scientists have called tepuis "islands in time" or "ecological islands" because of their unique ecosystems.

During your hiking adventure to Angel Falls and Canaima National Park, you will encounter a dazzling array of birds, such as macaws, toucans, parakeets, parrots, tanagers, hummingbirds and the illusive cock of the rock, as well as many other exotic species. The land is also rich in exotic wildlife, such as anteaters, jaguars, sloths and howler monkeys.

If you crave a hiking adventure tour that is out of the ordinary and off the beaten path, Angel Falls and the Canaima National Park are the natural wonders and adventure destinations for you.

Canaima National Park

The Canaima National Park and Angel Falls, Venezuela is located in the southeast of Venezuela in Bolivar State along the border with Brazil. The nearest city is Ciudad Bolivar some 600 km to the north.

Canaima includes the uplands of the Gran Sabana and the eastern table mountains (tepuis) of the Roraima Range, as well as the sandstone plateau of Chimantá and Auyán-tepui and the north-western Canaima lowlands. It comprises Precambrian rocks which have been subjected to 600 million years of erosion to form a spectacular landscape.

There are three disjunct physiographic units: undulating lowlands between 350 and 650m; the flat plateau of the Gran Sabana (800-1500m); and the tepui summits (2000-2700m). The summits reach 1000-2000m above the surrounding plateau and their surfaces are often scarred by gullies, canyons and sinkholes of several hundred metres depth. Water drains from the flat summits forming hundreds of waterfalls. The Río Caroní, with its many tributaries arising within the park, supplies the Guri dam which provides electricity to large areas of the country.

The Story of the Angel Falls Discovery

The Natives in Venezuela had known about the "Salto Angel" since the beginning of time. Then United States pilot Jimmie Angel was flying over the area in 1935 when he landed on the top of a lone mountain in search of gold. His plane got stuck in the boggy jungle on top of the mountain and he noticed a pretty impressive waterfall plunging thousands of feet down. He wasn't too happy about the 11 mile hike back to civilization, and his plane remained stuck and rusting upon the mountain as a monument to his discovery. Soon the whole world would know about the falls, which came to be known as Angel Falls, after the pilot who "discovered" them.

Angel Falls plunges from the top of a mesa, or what the natives call a Tepuyi. Named "Auyantepui", the Angel Falls mesa is one of over a hundred of its kind which are scattered about the Guiana Highlands of southeast Venezuela. Like so many slumbering giants, what characterizes these mesas (Tepuys) is their massive heights soaring up towards the sky, each with a flat top and totally vertical sides. Also called "table mountains" (which accurately describes their shapes) these Tepuys were formed out of sandstone billions of years ago. Their vertical sides are continually being eroded by the action of water from the heavy rainfall the Guiana Highlands gets.

Weekend's Featured: Ethanol Gets Big Boost by New Law

Gas guzzlers could become relics of the past and farmers may rival oil companies in producing motor fuels under a new energy law. Consumers also will save electricity — and money — from more efficient refrigerators, furnaces and dishwashers.

There will be improved efficiency labeling on TVs and computers. And the office building of the future may need less energy and rely more on wind, solar or biomass, becoming zero emitters of greenhouse gases. That's the future outlined by some energy experts as a result of new legislation President Bush signed on Wednesday.

Automakers now will be required to achieve an industrywide average fuel efficiency for cars, SUVs and small trucks of 35 miles per gallon by 2020, a 40 percent jump and the first increase in the federal requirement in 32 years.

The bill also stands to change the fuel motorists will use to power those cars, requiring a sixfold increase in the use of ethanol instead of gasoline. And it revs up the push for efficiency on everything from light bulbs and home furnaces to new commercial buildings.

Bush said these measures are "a major step toward reducing our dependence on oil" and addressing global warming. "Taken together, all these measures will help us improve our environment," Bush said at an Energy Department signing ceremony, adding that they "could reduce projected carbon dioxide emissions by billions of metric tons." Carbon dioxide from burning fossil fuels is the leading greenhouse gas, trapping the sun's heat in the atmosphere.

"We think it's the most significant energy saving law ever," said Lowell Ungar, policy director at the Alliance to Save Energy, a private advocacy group. The availability of more fuel-efficient vehicles is expected to save 1.1 million barrels of oil a day and save consumers $700 to $1,000 a year in fuel costs, according to an analysis by the Union of Concerned Scientists, an advocacy group, that was widely cited during congressional debate on the bill.

But second to that, the simple light bulb will likely bring the biggest energy saving to consumers. The law calls for the phaseout, beginning in 2012, of the inefficient incandescent bulb that has been in use since the days of Thomas Edison. By 2014 these bulbs "will be virtually obsolete," says Sen. Jeff Bingaman, D-N.M., who authored the lighting provision in the bill.

While the law will not dictate specific technology, the 100-watt bulb will have to be replaced, for example, by one that provides the same amount of light for 72 watts, with additional improvements required by 2020. "It's a big deal," Bingaman said in an interview. "These (new) standards will improve lighting efficiency by 70 percent by 2020." That's an electricity saving equal to shutting down 24 coal-burning power plants, and saving consumers $6 billion for electricity, Bingaman estimates.

The law also requires new energy efficiency standards for refrigerators, freezers, dishwashers and clothes washers, and requires improved energy-use labeling on light bulbs, televisions, computer monitors and other electronic products.

Homeowners may also find more efficient natural gas furnaces on the market. The bill makes clear that the Energy Department can issue more stringent efficiency requirements for furnaces in colder regions of the country than they do nationwide. It requires the department to move faster to issue appliance standards.

Ungar said a new program to foster more energy-efficient commercial buildings "is potentially huge" since such buildings account for much of the energy used today. But he cautioned that while the law authorizes programs to spur construction of so-called green buildings, Congress must still come up with money to fund the program.

Carlos Riva, president of Verenium Corp., a pioneer in developing cellulosic ethanol, says the new ethanol mandate will bring the investments needed to dramatically expand ethanol use. "We know the science and the process technology. The challenge is scaling it up to a point where it's competitive," Riva said in an interview. He predicted that within 15 years 20 percent of fuel people put into their cars will be alternative fuels such as ethanol.

"There will be more consumer demand for flex fuel vehicles," he said, referring to cars that can run on 85 percent ethanol blends. Verenium plans soon to finish construction of a demonstration ethanol plant and has plans for a commercial-scale plant within four years. Cellulosic ethanol is derived from materials such as prairie grass and wood chips.

Auto company engineers already have begun work to find ways to meet the new fuel economy standard. While the 35 mpg requirement won't go into effect for 13 years, the Transportation Department could begin ratcheting up mileage requirements as early as the 2011 car models. Eventually, some vehicles will have to exceed the 35 mpg, while others — some SUVs, for example — may fall short as long as the overall fleet average is 35 mpg, about 10 mpg higher than today's total fleet average.

Consumers are likely to see more advanced gas-electric hybrid vehicles, clean-diesel powered SUVs and small trucks, and more cars running on ethanol blends, according to auto company executives. Vehicles are expected to be lighter, but not necessarily smaller, with more sophisticated engine and transmission technologies aimed at saving fuel.

Brazil Announces New Amazon Protections

Brazil Announces New Measures Cracking Down on Amazon Deforestation.

Brazil announced Friday it will create a landholder registry and send 700 more federal police to the Amazon River basin in a new effort to monitor and prevent deforestation in the environmentally sensitive region.

The initiative includes measures that would identify illegal deforestation and ban the sale of livestock and produce grown in areas that had been illegal deforested, with violators subject to fines and loss of credit from government institutions. President Luiz Inacio Lula da Silva approved the initiative by decree on Friday.

The measures requires rural property owners to reregister their holdings in the Amazon to ensure compliance with Brazil's strict environmental laws. Land owners who failed to reregister would no longer be eligible for government loans and other benefits.

"This registry will permit us to create a common data base which will permit us to identify the rural areas which require action against deforestation," said Environment Minister Marina Silva, who is not related to president, at a news conference in Brasilia, the nation's capital.

After three years of substantial reductions in the pace of rain forest destruction, preliminary numbers suggest Amazon deforestation is speeding up, driven by rising agricultural commodity prices on the world market and relatively dry weather this year.

Silva said the registry would be carried out initially in 32 municipalities responsible for 45 percent of all deforestation in 2006 and other municipalities could be added later on. The environment minister also announced the government would send 700 federal police to the Amazon to aid the roughly 1,700 environmental protection agents, police and soldiers already in the region fighting illegal deforestation.

Brazil has some of the toughest environmental laws in the world, and land owners in the Amazon are required to keep 80 percent of their land in the Amazon as forest reserve. But the regulations are routinely flouted and hard to enforce in a region larger than Western Europe, and where land ownership is often unclear.

The Amazon lost a total of 5,400 square miles of forest cover between August 2005 and July 2006, and officials said they expected the deforestation rate to drop by about a third between August 2006 and July 2007, to about 3,700 square miles.

But preliminary number suggest that destruction in some states nearly doubled between July and September over the same period last year. The environment minister said the upswing was only about 10 percent.

Merrill Lynch May Get $5B Capital Infusion

Merrill Lynch Rise After Reports Say It May Get $5B Capital Infusion From Singapore's Temasek.

Singapore's state-owned investment fund is mulling a $5 billion investment in Merrill Lynch & Co., according to a report Friday, potentially providing the nation's biggest brokerage with badly needed cash amid billions of dollars in credit losses.

The investment bank is said to be in advanced talks with Temasek Holdings about a capital injection, according to a report in The Wall Street Journal. It would become the latest major financial services firm to turn overseas for cash to bail it out of huge losses related to the subprime mortgage crisis. A spokeswoman for Merrill Lynch declined to comment. Telephone calls to Temasek went unanswered.

Merrill has already taken $7.9 billion of writedowns from bad bets on risky mortgage-backed securities. Analysts have predicted that Merrill's mortgage writedowns may double with another $8 billion or more in the fourth quarter.

Jeff Harte, an analyst with Sandler O'Neill & Partners, estimated in a client note Friday the bank will record $10 billion in additional credit costs in the fourth quarter. His previous estimate was for fourth-quarter writedowns of $3.5 billion.

Analysts polled by Thomson Financial expect Merrill Lynch to lose money in the fourth quarter, and depending on the severity of the writedowns, the bank could post a loss for the year.Merrill's third-quarter writedowns led to a loss of $2.3 billion.

Global banks have written down an estimated $105 billion this year from exposure to mortgage-backed securities. And, there have already been a string of deals involving infusions from state-owned sovereign funds -- mostly from Asia and the Middle East -- announced in recent months.

Temasek's board has already given preliminary approval for an investment into Merrill, according to the report, which cited unnamed people familiar with the situation. Pricing, timing and regulatory issues remain to be negotiated, the report said. A deal with Temasek may not happen, the report said, adding that Merrill may be in discussions with other government investment funds besides Temasek.

Government-sponsored investment vehicles in the Middle East and Asia have invested about $25 billion in Wall Street since the mortgage crisis began this summer. Morgan Stanley on Wednesday announced a $5 billion investment from China's government-controlled investment vehicle to help replenish its capital.

In October, Bear Stearns Cos. agreed to a $1 billion investment from China's government-controlled Citic Securities Co. Citigroup Inc. received a $7.5 billion capital infusion from the investment arm of the Abu Dhabi government last month.

UBS AG last week announced that the Government of Singapore Investment Corp., the city-state's other state investment fund, is investing $9.75 billion for a 9 percent stake in the Swiss banking company.

Analysts said Merrill needed the potential investment. "We suspect (Merrill's) current capital position is adequate from a regulatory standpoint but, similar to (Bear) and (Morgan Stanley), its position is likely not sufficient from an industry competitive standpoint without a deal," Wachovia Capital Markets analyst Douglas Sipkin said in a note to clients.

Merrill Lynch shares have fallen about 20 percent since it announced on Oct. 24 writedowns on mortgage-backed debt and corporate loans. The company then ousted Chief Executive Stan O'Neal and replaced him with former New York Stock Exchange head John Thain. The stock climbed $1.04 to close at $55.54 Friday.

Thain was expected to act swiftly in restructuring Merrill Lynch in an attempt to better position its balance sheet amid the market turmoil. He's also no stranger to reaching out overseas to put a deal together. He led NYSE to buy European exchange operator Euronext, and made a significant investment in India's National Stock Exchange. Thain also has struck a cooperative agreement with the Tokyo Stock Exchange in a move analysts viewed as a first step before a broader deal.

Meanwhile, Temasek has a track record of making large investments in financial institutions, and has major holdings in Britain's Standard Chartered PLC and South Korea's Hana Financial Group. The fund was set up in 1974 to manage Singapore's assets, and now controls a portfolio of over $100 billion worth of investments.